They’re dancing in the hallways at Hilton Worldwide’s headquarters in Beverly…err, McLean, VA today as executives and employees celebrate last night’s announcement that the company and its parent, The Blackstone Group, restructured nearly all of Hilton’s substantial debt load. The deal extends the maturity of the debt until November 2015 and reduces total debt by a whopping $4 billion. To make it happen, the company purchased $1.8 billion of its debt and converted $2.1 billion of junior mezzanine debt to preferred equity. Without knowing more particulars, it sounds as though someone, probably Blackstone, took a haircut on the deal.
Hilton has been under a lot of financial and legal pressure lately, and this deal will go far to loosen the vise and enable the company to hang on until the hotel market completely turns the corner back toward prosperity. Blackstone bought Hilton in mid-2007, at the top of the market, for $20 billion. Since the industry downturn, rumors have swirled that the company has been struggling to meet its debt obligations and that it might look to shed some brands. (If the latter is still the case, Hilton honcho Chris Nassetta should call Steve Joyce at Choice Hotels. Joyce has openly coveted Hilton’s Doubletree brand, figuring it to be a good fit into Choice’s currently brand lineup of mostly limited-service flags.)
Of course, Hilton still has one nagging problem looming: the lawsuit and federal investigation surrounding allegations that Hilton stole company secrets from Starwood to jump-start its now-abandoned attempt to enter the upscale lifestyle hotel business.

Both the consumer press and the hotel press have reported unusually good news in recent weeks. At the end of last week, the big national story was the jump in new jobs (162,000) added to the economy in March. And while there is debate on the composition and value of those jobs, it should be clear to all that adding jobs is better for the economy than losing them. The result has been cautious buoyancy in consumer sentiment. People feel better when the news is hopeful, often leading to more spending, which leads to more jobs, etc.
Similarly, recent news releases from Smith Travel Research have given hoteliers a spring in their steps that no one has seen since 2008. Last Thursday, STR reported hopeful upswings in both occupancy (up six percent) and RevPAR (up 4.2 percent) for the previous week. Even average rate, which nosedived in late 2008 and hasn’t recovered much since, was only down 1.6 percent last week. You can’t deny things are looking up for the hotel industry.
And the forecasts from STR, PKF and others point to even stronger gains by the end of the year and into next. PKF sounded the most optimistic note, forecasting RevPARs will soar by double-digit percentages once we make it to 2012.
Yet, we need to rein-in our enthusiasm a tad. Yes, business (and the economy) are getting better, but only slowly and not evenly across all segments, markets and locales. And there’s no guarantee some event or trend could trigger another downturn in the economy (the dreaded double dip) that would likewise mar the lodging industry’s march toward recovery.
It’s prudent to rejoice at improvements in business, locally, nationally and globally, but don’t get carried away thinking good times are once again right around the corner. I suspect we’ll see a lot more pain before life returns to what we remember as normal, if that ever happens at all.

Barry Sternlicht seems poised in a big way for a return to the industry that gave him fame and fortune in the 1990s. The founder and former chairman of Starwood Hotels is on the prowl for two high-profile hospitality assets, and he has a multi-billion-dollar war chest to get it done.
His Starwood Capital Group has bid $905 million to take Extended Stay America out of bankruptcy. If it succeeds, Sternlicht will become chairman of the extended-stay brand. And late last week, I saw a report from Las Vegas that Starwood Capital may bid to acquire Riviera Holdings, a down-on-its-luck company whose major asset is the aging 2,000-plus-room Riviera Hotel on the Las Vegas Strip. Sternlicht was quoted as saying that if successful he could end up owning the Riviera “for about $5,000 a room, which is less than the cost of the furniture.”
While it’s romantic to think Sternlicht is making these moves because he yearns for a return to the lodging business, we all know it’s for more basic reasons: opportunity, timing and potential profits. I’m not sure anyone can salvage the carcass of either Extended Stay America or the 55-year-old Riviera, but I wouldn’t bet against Barry. My guess he’ll do something dramatic, make a lot of headlines and end up with a huge profit for himself and his investors.

That annual rite of spring—the launch of daylight savings time—comes this Sunday for most areas of the country. (Those not participating include Arizona, Hawaii, Puerto Rico and U.S. Virgin Islands.) While all of you will probably remember to reset your clocks at home and in your cars, it’s important not to forget to do so in your hotels.
A few years ago, someone on our staff was in a Florida hotel on spring vacation. The hotel failed to change the clocks (or, more easily, remind guests to do so) so she and her family missed their flight back home on Sunday morning. Technically, the hotel didn’t do anything wrong since it’s everyone’s personal responsibility to remember these things. However, people on vacation tend to lose track of everyday concerns so it’s easy to understand how they can forget the switch to daily savings time.
Here is the easy solution to this situation: Print a reminder about the switch and have your housekeepers put it on every guestroom bed this Saturday.
Happy spring.

The politicians in Washington may be ineffective and sometimes loony, but they’re no match for their counterparts roaming the 50 state capitals. Here are two particularly harebrained schemes dreamed up by sad and desperate state legislators that seem to have no rationale, except as ways to torment the hotel industry:
• In budget-strapped Tennessee, officials hope to raise an additional $10 million by taxing the value of the food hotels serve to guests as part of complimentary free breakfasts. The proposal in the general assembly is to collect taxes on the food at prevailing sales tax rates by county. A maximum of 9-3/4 percent could be levied. Naturally, the Tennessee Hospitality Association is fighting the proposal, as well it should.
Since the cost of free breakfasts at hotels are built-in to room rates, guests already pay taxes on the meals. My guess is this idea won’t gain much traction, but it’s an example of what lengths states, cities and even the federal government may go to shore up their budgets. We all need to stay vigilant to these kinds of tactics.
• An even wackier idea (although not one related to taxes) is floating around the Minnesota state legislature. That proposed legislation would prohibit spending state funds at any hotels in the state that offer violent pornography on their pay-per-view TV systems. The idea raises a number of interesting questions: Who determines which porno movies are violent and which are not? Is it okay for state employees to stay at hotels with violent porno while they’re out of state?
I’m nearly certain this bill won’t get passed either. It’s a touchy subject for hotels, however, so I’m sure the state’s lodging industry lobby will tread lightly on this and hope it dies a natural death.

The news this past weekend that former Secretary of State Alexander Haig died reminded me of one of the funniest—in retrospect, anyway—incidents I’ve experienced at a hotel chain convention. Sometime in the mid-1980s, Best Western had its annual convention in Washington, DC and invited Haig to be its keynote speaker. (I’m sure the late Skip Boyer, Best Western’s in-house historian, would have remembered the year and location specifics better than I have.)
In front of a packed house of Best Western members, journalists, vendors and others, Haig delivered a lengthy speech in which throughout he referred to Best Western as “Great Western,” as in, “I’m so glad to be here today speaking before the Great Western conference.” Not just once did he make this gaffe but it was throughout the speech. As I say, it made me chuckle, but it rightly infuriated and embarrassed the Best Western officers and staff. I’m sure the company paid Haig a hefty fee for the speech, for which the least he could do was get the name of his benefactor correct. After this fiasco, I heard rumblings that Best Western tried to get its money back, or stop payment on the check, but I never heard the outcome.
I’d like to hear from any Best Westerners or others who may remember this simultaneously funny and sad incident.

It’s not ready to announce a new brand—if it ever will—but a Marriott official today said the mega-hotel company has been studying the all-inclusive resort segment “for two years.” Speaking at the inaugural Caribbean Hotel & Resort Investment Summit in Miami, Ed Fuller said he thinks “there is a role for us in all-inclusives.” Fuller heads all of Marriott’s international operations.
By contrast, Jim Abrahamson, chief of IHG’s Americas division, said his company isn’t considering an all-inclusive brand, even though several of its properties in Latin America operate in the segment. “For us, we need to operate all-inclusives as a defensive measure in some markets, such as Cabo San Lucas (Mexico) and Cancun (Mexico),” he told the crowd of 200-plus delegates.
Abrahamson and Fuller were on a lunch-time leaders panel at the conference that originally was slated for four participants. The other two executives—Steve Joyce and Thorsten Kirschke of Carlson—were snowed in and couldn’t make it to the conference, which wraps up tomorrow.
Fuller said Marriott currently has 19 properties in the Caribbean, but that roster could double or triple within five years. Most of the growth, he said, will come in three-star properties, such as its Courtyard brand. Likewise, Abrahamson predicted IHG will double its Caribbean presence in five years, mostly through conversions. The company currently has 10 properties in the region.

As the lodging industry moves sluggishly toward recovery, the common wisdom was we would now be knee-deep in hotel transactions of all sorts—individual properties, portfolios of hotels and even a chain or management company or two. With plenty of hotel real estate in distress and a pile of equity money burning holes in a lot of pockets, I and many others thought dealmakers would be hard at work by now linking buyers and sellers.
It just hasn’t happened, and no one I talked to at last week’s ALIS Conference in San Diego had a definitive answer as to why. Here are a few possibilities:
• Hotel owners have yet to come to terms with the naked facts that their properties are no longer worth what they think is fair value. In fact, in many cases, these hotels aren’t worth what the owners still owe on them. On the other side of the coin, a lot of erstwhile buyers think they can pick up product on the cheap, like 20 cents on the dollar. When the two sides meet somewhere in the middle, deals will begin to flow.
• Banks and other lenders have little appetite to own real estate—especially assets as complicated as hotels. And if real values are anywhere close to the 20 cents on the dollar buyers think they are, then the banks don’t want these troubled assets on their books.
• Another variation on this line of thought holds that banks realize values are way down and the hotel industry is beginning to rebound—albeit very slowly. Their rationale may be to wait until hotel fundamentals improve significantly and values rise concurrently, and then sell.
The real answer, of course, is probably a blend of these and other reasons. A few things we know for sure: hotel real estate is distressed, a lot of lenders are holding bad paper and a lot of private money (one estimate says $40 billion) is waiting to make investments. This all points to a scenario of increased dealmaking. Everyone thought it would have happened by now, and no one knows when the current trickle will become a torrent.
It will be interesting to watch once the dam breaks.

Just last month, some bloggers were speculating that Hilton and Starwood were about to reach a settlement in the nasty corporate spying lawsuit that first blossomed last April. Instead, earlier this month the situation got even nastier as Starwood amended its filing to accuse 44 of Hilton’s top executives of being involved in the plot or having knowledge of it.
In the original suit, Starwood claimed two of its former executives—Ross Klein and Amar Lalvani—went to work for Hilton and took with them proprietary company information they used to develop Hilton’s Denizen brand. Once the alleged plot was uncovered, Klein and Lalvani left the company and Hilton halted work on Denizen, a new brand that was aimed directly at the upscale lifestyle segment pioneered by Starwood’s W chain.
Most damning in the updated filing is the charge that Hilton CEO Chris Nassetta and former development chief Steve Goldman knew of the corporate espionage and did nothing to stop it. Goldman left Hilton last year without comment from the company. The suit also alleges that Hilton has used Starwood’s purloined “secret sauce” as it develops other high-end brands, including the Waldorf-Astoria Collection, Prestige Portfolio and Conrad.
Suits are never fun and generally only serve to make lawyers happy and rich. The timing of this additional filing seems particularly awkward given that most of the industry elite, including top officials from Hilton and Starwood, will gather in San Diego next week for the ALIS Conference. Scanning the program brochure, I see Nassetta and Starwood chief Frits van Paaschen aren’t scheduled to be on any panel discussions together. But you’ve got to imagine they’ll run into each other in the hallways or lounges of the Hilton Bayfront. I hope, by some chance, I’m there when it happens to listen to their exchange of pleasantries.

Anupam Narayan is out as president and CEO of Red Lion Hotels. In a terse announcement this afternoon from the Washington-based chain, Jon Eliassen was named interim head of the company. Narayan’s departure was only explained by saying his “employment ended on Jan. 13.”
I wish Narayan all the best. At Red Lion and Best Western before, I always found him to be a serious, thoughtful and creative lodging industry leader. Perhaps he left on his own accord, but it doesn’t sound like it. I sure, however, he’ll be sought by another hotel company or even a business outside of lodging. If the latter is the case, then it is a serious loss for the hotel industry.
We’ll provide additional details as we learn of them.
Eliassen is an independent director on Red Lion’s board.